WeWork rescue plan hits a snag as SoftBank backs out of $3 billion share buyout

The Japanese tech company has backed out of a plan to buy $3 billion worth of WeWork shares from existing shareholders and investors, according to statements from SoftBank and a special committee of WeWork’s board.

“The tender offer closing was conditioned on the satisfaction of certain closing conditions” agreed to in October, Rob Townsend, SoftBank’s chief legal officer, said in a statement on Thursday. “Several of those conditions were not met, leaving SoftBank no choice but to terminate the tender offer.”

Shares in SoftBank (SFTBY SOFTBANK) rose 3% in Toyko following the news.

SoftBank’s about face cuts deep for Neumann — the October agreement had included an offer to buy up to $975 million worth of the WeWork founder’s shares.

The Japanese company cited several conditions that WeWork didn’t meet, including failing to obtain necessary antitrust approvals by April 1, the existence of “multiple, new, and significant pending criminal and civil investigations” into the company and global restrictions related to Covid-19 affecting WeWork and its operations.

WeWork declined to comment, however the special committee of WeWork’s board said in a statement on Wednesday that it “is surprised and disappointed” by SoftBank’s move. It added that it will evaluate all legal options, including litigation.

Last year, WeWork’s botched IPO left it teetering on the edge of insolvency until SoftBank stepped in with a roughly $10 billion rescue package. The deal gave SoftBank 80% ownership of the startup. Neuman had already stepped down as CEO amid anger from employees and investors over his leadership of the company.

At an earnings presentation last month, SoftBank CEO Masayoshi Son boasted about a turn around plan that would see WeWork turn cash flow positive in a couple of years.

Masa Son's global tech empire is being rocked by the pandemic. Don't count him out just yet

But the global coronavirus pandemic has thrown a spanner in the works.

Sweeping restrictions on work, travel and social distancing aimed at preventing the spread of the virus are putting both WeWork and SoftBank under enormous pressure.

WeWork is suffering, as major cities where it operates shut down for weeks on end. It still has to pay long-term leases, even if businesses squeezed by the outbreak cancel contracts with the shared office space company.

Meanwhile at SoftBank, the coronavirus poses a catastrophic threat for many of the startups CEO Son has plowed money into through his $100 billion Vision Fund. In an effort to rescue SoftBank’s plummeting share price, Son last week made the surprise announcement of what amounts to a fire sale of $41 billion worth of assets to buy back shares and reduce the company’s heavy debt load.

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